Shell says EU energy regulation diverts $1 billion from trading

Laws target commodity speculators

Royal Dutch Shell Plc, Europe’s largest oil company, said the European Union’s planned regulation to curb speculation in commodity derivatives may endanger security of energy supply.

EU lawmakers have been reviewing the Markets in Financial Instruments Directive, or Mifid, which is “targeted” at financial commodity speculators, said Shell Chief Financial Officer Simon Henry. Shell expects to divert about $1 billion of additional capital for increased margin collaterals from its trading business in February or March to comply with the rules, locking up money that could be used in businesses to ensure supplies for customers, he said.

Shell is not a speculative trader, the CFO told reporters in London today. “The Mifid requirements are reducing our ability and our flexibility to provide risk-management products to our customers.”

The EU’s bid to revamp market oversight is the key element of its effort to implement agreements reached by the Group of 20 nations in the wake of the turmoil that followed the 2008 collapse of Lehman Brothers Holdings Inc. The accord must still be formally approved by the assembly and by national governments to take effect.

“This is essentially politically driven,” Henry said. “Consequential damage to the oil markets is just seen as precisely that.”